The largest counterfeit currency scandal in 50 years of Communist Party rule came to an end last week with the execution of seven gang members.

An investigation involving thousands of police exposed the unprecedented scale of counterfeiting and criminals' links with corrupt local officials and police, state media said.

The scandal again put Shanwei, a quiet coastal city in Guangdong province, on the map as the mainland's counterfeit currency capital. The Shanwei-based ring printed and distributed 641.6 million yuan (HK$596.7 million) in fake bank notes from April 1995 to June 1999, according to Southern Metropolis News, a Guangdong-based newspaper.

The crackdown, headed by Shanwei's mayor and party boss, lasted for more than two years until the end of 1999. In one raid in August 1999, more than 3,000 police were mobilised.

The trial saw the highest number of death sentences for the production of counterfeit notes, the newspaper said.

Shanwei has a long tradition of printing and selling fake banknotes. As early as 1990, poor-quality forged notes from Shanwei were seized from local fishing boats. At the peak of counterfeiting in the city in 1999, it was believed that about 80 per cent of fake notes on the mainland came from Shanwei.

Thirteen provinces, including areas as far away as Inner Mongolia and Qinghai have reported fake notes made in Shanwei, the newspaper said.

One reason for the rapid expansion of counterfeiting was found to be corrupt government officials and police officers.

In a raid in August 1999, counterfeit gang leader Zhuo Bingyao asked police why they had seized him when they had promised not to do so. A no-arrest order had been issued by local police who were on the gang's payroll.

More than a dozen law-enforcement officers have been prosecuted and convicted, including the city's deputy chief of public security and other senior police officers, as well as the chief of the procuratorate.

Dozens of raids were carried out during the investigation. But tip-offs from corrupt officers often allowed the gang to move equipment and avoid arrest.

However, police found 15 million yuan in fake notes in a fruit and vegetable processing plant in 1995, nine million yuan in a canteen of a Communist Party office in 1996 and 48 million yuan in a cave in 1998.

The largest amount seized in a single raid was 271.2 million yuan in a plant disguised as a watch manufacturing company.

The quality of the notes produced by the Shanwei gang continually improved over the years.

The paper said the counterfeit operation evolved from a pawn shop and fishing boat operation into a well-organised gang responsible for production, sales and distribution. The organisation was described as tightly knit, with sophisticated printing machines and close family ties.

It said many family members were involved without knowing that printing the notes was a criminal offence.

When the ringleaders were taken away by police for execution, a father of the one sentenced cried: 'Why are you going to execute him? He has neither killed somebody nor set them on fire.'

Beijing passed tougher laws over the control of the Chinese currency in May 1999.